Harsha Upadhyaya of Kotak Mutual Fund believes that the pace of earnings recovery against inflows are slower. He likes consumer discretionary space and cements, and sees downside for IT.
Even as liquidity keeps flowing, the pace of earnings recovery is still very gradual, noted Harsha Upadhyaya, CIO-Equity at Kotak Mutual Fund in an interview to CNBC-TV18. "One must tread with caution at this point. Among mid and small caps, too, one has to be cautious," he said.
After weeks of sustained bull run, which saw equity benchmarks consistently clocking fresh record highs, the market seems to have headed into consolidation mode this week. The Nifty managed to breach the 9600-mark on Monday amid weak movements on midcaps, private and public banks, along with metals.
Upadhyaya also shared his sector-wise approach in current market conditions.
Consumption discretionary - Consumer demand should hold up well, but he advised caution on valuations. Rural demand, he said would be much stronger, with good monsoon last year. “Even now the monsoon has begun at a good pace,” he told the channel.
Information Technology - Headwinds for the sector could remain and he preferred staying away from it. Appreciation in the rupee could be the next big risk, he said.
Cement - There is potential upside for the sector, but some stocks could be reaching over-valuation points. From a multi-year perspective, the sector is positive, he added.
Banks - Kotak has turned cautious on the banking space of late and Upadhyaya said they preferred more exposure in private banks and NBFCs. “We are overweight on segments with less NPAs and higher growth areas,” he said. Farm loan waivers are also a negative for the sector, he added.NBFCs - Upadhyaya preferred retail-focused NBFCs and has added housing finance companies across portfolios. However, valuations here, too, could be slightly higher, he noted.